NPS vs EPF: Comparing Two Leading Retirement Schemes
- 4 min read•
- 1,620•
- Published 18 Dec 2025
Key Highlights
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National Pension Scheme (NPS) and Employees Provident Fund (EPF) are two prominent retirement schemes. Each of them has distinct features.
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EPF is mandatory for salaried employees. Both employers and employees contribute 12% of the salary to the fund. On the other hand, NPS is a voluntary retirement scheme open to all Indians.
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NPS provides market-linked returns. However, the central government decides the interest rate on EPF.
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NPS allows exposure to equity up to 50%. However, EPF contributions are invested in state and central government securities, PSU bonds, etc.
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NPS has limited withdrawal options before the age of 60. On the other hand, EPF allows partial withdrawals for specific reasons before retirement.
What is NPS?
The National Pension Scheme (NPS) is the Central Government's social security programme. Employees in the public, private, and even unorganised sectors are eligible for this pension plan. Individuals can deposit money on a monthly basis. The account holders may withdraw a certain portion of the corpus upon retirement. They will receive a monthly pension after you retire. Previously, only the Central Government employees were covered by the NPS. It was mandatory for those joining the service on or after January 1, 2004. However, now NPS is available to all Indians.
What is EPF?
EPF is a retirement benefits program in India. Both the employee as well as his employer must contribute to the fund. The Central Government of India has made it mandatory for industries and companies with more than 20 employees to enrol under the Employee Provident Fund. This account is regulated by the EPFO which ensures that subscribers get the maximum benefit after retirement.
12% of the basic salary and DA is deducted from your salary towards the EPF account. The employer also contributes the same amount. However, the employer’s contribution is split into two parts. 3.67% is deposited in your EPF account. The rest of the amount is contributed to the Employees’ Pension Scheme (EPS).
You earn interest on these deposits. Thus it ensures that you receive a huge amount when you need it. EPF has a higher rate of interest than many other savings schemes. It is compounded every quarter. The current rate of interest is 8.15%.
NPS vs EPF
Let us now analyse and compare both schemes and understand the difference between NPS and EPF.
Investment Area | Equity (up to 50%) and fixed-income securities | State and Central Government Securities, PSU bonds, deposits |
Return Rate | Market-linked (8.5% - 12%) | Guaranteed (8% - 8.5%) |
Liquidity | Limited (partial withdrawal after 3 years, full withdrawal at 60) | Flexible (partial withdrawals for specific reasons) |
Tax Benefits | Up to Rs. 2 lakh under Section 80CCD (1) and 80CCD (1B) | Contributions under Section 80C, interest tax-free |
Eligibility | All Indian citizens (except NRIs and HUFs) | Employees of companies with 20+ employees |
Maturity Period | 60 years (extendable) | Until retirement |
Control over Investments | Active choice and auto investment modes | Limited control |
Conclusion
Both NPS and EPF are excellent retirement plans. You can invest in EPF if you're looking for steady returns. To get higher returns from market-linked securities you can go with NPS. While NPS offers limited liquidity, EPF is quite flexible. NPS funds are mostly invested in equities and fixed-income assets. Conversely, mostly bonds are the investment area of EPF. The maturity period of NPS is 60 years, but it can be extended. However, the maturity period of EPF is until retirement only. Thus, determine your needs and risk tolerance to select between NPS and EPF. Alternatively, you may also invest in both!
